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Romania: Practical Issues in Romania for Non-Resident Employers

posted 3 years ago

More and more non-resident companies choose to hire Romanian employees for certain activities in Romania without being present in Romania. Apart from the mandatory employment agreement (according to Romanian law), there are two options on how to handle such situation, depending on how many administrative burdens the employer wants to deal with:

1st option

Based on the first option, the employer is registered for tax purposes with the Romanian authorities or appoints an authorized representative to submit the declaration and pay both the social contributions and income tax for the Romanian employee.

2nd option

The more attractive alternative, especially for the market entry, provides for a special agreement between the employer and the employee, stating that the latter shall take care of the formalities towards the Romanian state. Such an agreement must specify in detail:

  • the activity of the employer based on the NACE classification; and
  • the fact that the employee will be responsible to calculate, declare and pay not only his own income tax and social contributions, but also the ones pertaining to the employer.

In order to take over the employer´s obligations, the employee must fill in a tax return (020) and hand it in with the local authorities together with the agreement concluded with the employer. Based on such first registration, the employee must subsequently hand in monthly forms (112) filled in correctly, which is sometimes difficult.

Deadline for payments

Irrespective of the option chosen, both income tax and social contributions are due on the 25th of the month following the one of the earnings. In case the second option applies, the employer must make sure that he wires the entire amount to the employee, meaning net salary (like for resident employees), plus income tax and social contributions for both parties.

Risks

The choice in favour of the second option should not only be of practical advantages. Employers should bear in mind that there are more risks connected to such alternative considering that they transfer their responsibility to their own employee.

In order to make sure that the employee does fulfill its obligations to pay the amounts also in the name of the employer, special clauses must be included in the agreement to be concluded. Moreover, when deciding which way to go, fiscal risks connected to the so-called fiscal permanent establishment should also be taken into consideration.

Please find more detailed information at

https://stalfort.ro/wp-content/uploads/2017/09/20210318_CV_Non-resident-employers-and-Romanian-employees-practical-aspects-1.pdf

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